BOND VALUATION An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond...

50.1K

Verified Solution

Question

Finance

BOND VALUATION
An investor has two bonds in her portfolio, Bond C and Bond Z.Each bond matures in 4 years, has a face value of $1,000, and has ayield to maturity of 9.5%. Bond C pays a 10% annual coupon, whileBond Z is a zero coupon bond.
Assuming that the yield to maturity of each bond remains at9.5% over the next 4 years, calculate the price of the bonds ateach of the following years to maturity. Round your answer to thenearest cent.
Years to Maturity Price of Bond C Price of Bond Z
4 $ $
3
2
1
0

Answer & Explanation Solved by verified expert

3.9 Ratings (715 Votes)

Price of bond C for 4 years Information provided Par value future value 1000 Time 4 years Yield to maturity 95 Coupon rate 10 Coupon payment 0101000 100 The price of the bond is computed by calculating the present value The below has to be entered to compute the present value FV 1000 N 4 IY 95 PMT 100 Press the CPT key and PV to compute the present value The value obtained is 101602 Therefore the price of the bond is 101602 Price of bond C for 3 years Information provided Par value future value 1000 Time 3 years Yield to maturity 95 Coupon rate 10 Coupon payment 0101000 100 The price of the bond is computed by calculating the present value The below has to be entered to compute the present value FV 1000 N 3 IY 95 PMT 100 Press the CPT key and PV to compute the present value The value obtained is See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member